makes sense. Expensive tech stocks like Nuvei were in a downdraft as investors turned from high-growth names. Most importantly, it was targeted by a short-seller that had previously taken aim at Lightspeed, another Canadian company in Nuvei’s industry. The stock fell 40 per cent on the day of the short report, wiping out more than $7-billion in market value, and hasn’t fully recovered.
But the funds’ portfolios suggest something else entirely: A look under the hood reveals many holdings that pay no dividend, are unprofitable, have exceptionally high valuations, or some combination of the three characteristics. The shares are now again worth more than what Manulife paid for them so, congratulations, I guess? But the fact the two dividend funds held so much of the volatile Nuvei – only recently profitable, no dividend, no payout seemingly forthcoming – is another example of unusual choices for funds with “dividend” in their name.stock in the second quarter – just before the company’s surprise disclosure that it was growing cannabis without a licence and the commensurate collapse of the shares.
There were about 170 holdings in the Manulife Dividend Income Fund, according to analysis performed with the screening tools in S&P Global Market Intelligence. About 100 of them did not pay a dividend, and about three dozen were unprofitable on the basis of EBITDA, or earnings before interest, depreciation and amortization. In addition to those three dozen, for which no price-to-earnings multiple can be calculated, another 31 traded at about more than 40 times their trailing EBITDA.
Ms. Earle’s statement is both a defence and a kind of acknowledgment: Indeed, many of the stocks that are unprofitable or expensive are in small positions, making up tiny portions of the funds. Rather than doing a strict head count, when you weight the stocks by the size of their positions, the vast majority of the funds are indeed dividend-payers.
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